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Tangoe to pay $1.5 million to settle accounting fraud charges

BY LIESE KLEIN

9/11/2018
Photograph | Edison Partners
Photograph | Edison Partners
Former Tangoe CEO Al Subbloie.
Tangoe Inc., a software company formerly headquartered in Orange that specializes in telecom-expense management, has agreed to settle charges that it cooked its books to hide losses. The Securities & Exchange Commission alleged that Tangoe improperly claimed $40 million in revenue out of a total of $566 million between 2013 and 2015.

According to the charges, Tangoe executives improperly reported pre-payments as revenue, claimed short-term loans as revenue and in some cases falsified records.

In the one instance cited in the SEC filing, Tangoe reported as revenue a $250,000 prepayment in 2014 on future services for a major customer. In fact, the company's own policies and general accounting rules required that the sum be recognized as revenue only when the services were performed. The SEC charged that fake invoices were fabricated to support the claim.

Top officials at Tangoe in 2014 also concealed an expected revenue shortfall for the second quarter by borrowing funds from a payment processor and claiming it as revenue, according to the SEC charging document.

The probe into Tangoe's books began in August 2015 when a recently dismissed sales executive sent the company a "demand letter" alleging fraudulent billing and reporting, according to the SEC filing. After an internal investigation, the SEC was notified that previous financial reports contained errors and misstatements. The upshot was that in nine straight quarters beginning in the first quarter of 2013 through the first quarter of 2015, Tangoe had lost money on a pre-tax basis; the company had reported itself as profitable in that period.

In the wake of the probe and financial restatements, Tangoe announced it would lay off 10 percent of its total staff in June of 2016. Marlin Equity bought the company for $246 million in April 2017 and announced it would consolidate Connecticut operations in Shelton in October of 2017. Shortly after that, Tangoe's headquarters were moved to Parsippany, N.J., although it maintains a Shelton office at One Waterview Drive.

The SEC announced the charges and settlements against key players at Tangoe on Sept. 4. Pending a judge's approval, Tangoe will pay $1.5 million to settle the SEC case. Former CEO Albert R. Subbloie has agreed to pay $100,000, former CFO Gary R. Martino, $50,000, and former Vice President of Finance Thomas H. Beach, $20,000.

Pending charges against Donald J. Farias, Tangoe's former senior vice president of expense management operations, are being handled by the SEC Boston regional office.

Reach Liese Klein at lklein@newhavenbiz.com